Most Powerful Open Source ERP

Complete Coverage ERP Implementation for Japanese Pesticide Producer

Sankei Chemical chose ERP5 because of its ability to implement the highly complex price models used in Japanese pesticide industry. Sankei runs an integrated ERP5 solution to manage pesticide production, purchase, sales, shipment and inventory. Thanks to ERP5s flexible design philosophy, the system could be fully customized to Sankeis business processes including interfaces for electronic trading data exchange with large industry organizations and key customers. The success case shows the importance of client-side project management for an ERP implementation project and why sometimes perseverance is required for a perfect requirement analysis.

Last Update:2018-04-16

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Language:en

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Sankei Chemical is a long-established pesticide production company based in Kagoshima, in the south of Japan. Through the implementation of ERP5 Sankei was able to integrate its 6 sites and improve its business processes which were previously managed by several separated programs for production management, order management, shipping management and warehouse management. This integration was possible because of ERP5‘s ability to adapt to the specific requirements of Sankei thanks to technologies such as ERP Supply and ERP5 Simulation.

Improving data exchange with customers

The first step of the ERP5 implementation methodology is to define the priorities for business process improvements that should be reached with the adoption of ERP5. For Sankei the frictionless trading data exchange with its clients is crucial for efficient management of its sales processes. Therefore, the first priority was to improve the interfaces to clients. Sankei wished to implement the EDI interface to Zennouyaku, an
association of pesticide seller companies. Many clients of Sankei are
members of this association and the previously used sales management software did not support this interface. Additionally, in 2009 the protocol of the interface to one of Sankei‘s key clients was revised and Sankei had to adapt itself to the new protocol version. At the same time the license of the previously used sales management software expired. Sankei took the opportunity to implement a customized ERP system based on ERP5 at less cost than renewing the license of the existing sales management software and
customizing it.

Sale order and shipment management was implemented with ERP5 Trade which was connected to Zennouyaku interface with zgateway, an open source implementation of Zengin TCP/IP protocol used among banks and companies in Japan. Thanks to this integration sale orders from Sankei clients are now automatically created in ERP5 and shipping information is sent to clients automatically from ERP5 sale packing lists. This way the number of orders from fax and telephone could be reduced which makes the sales process more efficient and less error-prone for Sankei as well as for its clients.

Project Key Indicators

Integrator

Nexedi KK

Time to prototype

1 month

Modules deployed

ERP5 Trade, PDM, MRP, Item:35 frequently used modules

Time to cover the complete scope

24 months

Number of users

100

Number of interfaces

4

Number of client-specific unit tests

163

Implementing complex price models with ERP5 Supply

The second improvement priority for Sankei was price calculation. The previously used sales management system was not able to implement the complex pricing rules used in Japanese pesticide industry. It was not possible for Sankei to check the correctness of the prices of orders coming through the old EDI interfaces. Proper price calculation was therefore identified as an important objective for the ERP5 implementation project. ERP5 Supply is the key technology to implement very complex price models in ERP5. It allows defining prices and special discount ratios based on rules which can take any type of condition into account. For Sankei, the sale supply module was configured to enter prices per combination of customer, product, product variation, shipping date and shipping region. Thanks to ERP5 Supply, end users can now manage price calculation rules by themselves.

Here we see how Sankei uses ERP5‘s sale supply module to define discounts by combination of product, time and region.

Each sale supply is related to a product or service. In Sankei‘s configuration discounts are entered in a matrix where the x-axis defines the months of the year and the y-axis defines each prefecture in Japan.

Accurate handling of future order changes with ERP5 Simulation

Sankei‘s third improvement priority was handling of future changes in sale order management. When Sankei processes a sale order, the price sometimes changes after shipment and sometimes even after the invoice has been issued. With Sankei‘s old management system, those cases had to be handled manually. Therefore, Sankei could not have an accurate overview of current and past sales data. The objective for the ERP5 implementation was therefore to handle future changes of sale orders automatically. This improvement was realised using ERP5 Simulation, the key technology in ERP5 to implement any complex business process of manufacturing companies: planning of purchase and production orders, processing of incoming sale orders, shipment planning, invoicing, payment and many more. The first purpose of ERP5 Simulation is to automatically create previsions based on orders and constraints, for example the planning of production orders based on current sale orders and stock constraints. The second purpose is to solve inconsistencies between previsions and human decisions.

For invoicing of sale orders, ERP5 Simulation creates a planned sale invoice transaction once a sale order is confirmed. The sale invoice transaction contains the quantity and price information from the sale order lines. For Sankei, a customized simulation rule has been added which is applied as soon as the prize of a confirmed sale order line is changed. The simulation rule first checks, if the sale invoice corresponding to the sale order has been already issued or not. If the invoice has been issued, two new invoices are created automatically: One reversal invoice to compensate for the original invoice and one new invoice which contains the corrected prize. This way, the human decision to change the price of a sale order afterwards is taken in the sale order module while the consequences for invoicing are handled automatically. Reports for sale orders always reflect the correct price values, even if the price has been changed after sales.

Deciding the priorities for business process improvements and defining the most important requirements are key success factors for an ERP implementation. These tasks require dedicated resources at client side because it‘s the client who best knows his business processes. Ideally the client assigns a dedicated person to manage the ERP implementation project internally. This project manager should have a general overview of the company‘s processes and possess the authority to balance contradicting wishes of different individuals and groups in the company. The project manager decides the priorities for improvements that should be achieved through the ERP implementation and enforce changes in business processes to achieve these improvements.

Other than large organisations, Small and Medium Enterprises (SMEs) such as Sankei often face challenge to free management resources for an ERP implementation project. This SME-specific burden is well known in information systems research. Because of lack of human resources and overwork of staff, SMEs often cannot dedicate enough resources to internal ERP project management. This in turn increases the risk that the ERP, once implemented, does not meet the requirements of the client.

Nexedi KK mastered the challenge resulting from lack of client side project management in the Sankei ERP5 implementation project by perseverance. Yusei Tahara, Nexedi KK CEO explains: "In the beginning of the project Sankei staff faced difficulties to express what is important for them. It was not possible for Sankei to assign a dedicated project manager to perform the requirement analysis internally. Nexedi KK mastered this challenging situation by perseverance: During 6 months we regularly visited every division and every site of the company, we talked to everybody. This way we achieved a deep understanding of Sankei as a company and its business processes. Step by step we assembled the list of requirements. Thanks to perseverance we completed the ERP5 implementation successfully and achieved high customer satisfaction. As Sankei‘s business processes evolve, we extend the ERP in an evolutionarily."

Lessons Learnt

Proper project management at client side, in particular internal consolidation of requirements significantly reduces cost and time to delivery of an ERP implementation project.

If proper client-side project management cannot be provided because of lack of human resources, then perseverance helps to finish the ERP implementation successfully: requirements can be identified and implemented step by step through regular meetings with customer staff and evolutionary feature extension.

Identifying the most important business process improvements at an early stage is a key factor for a successful ERP implementation.

When replacing an old ERP system, master data clean-up is often required to take advantage of the new ERP implementation. Performing master data clean-up on the client side reduces the cost of the ERP implementation project.